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TMI Blog2012 (7) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation method of stock has been accepted by the Department in case of its sister concern. The amount of sales tax and VAT embedded in the value of purchase and sale has also been reflected in the weighted average cost. No material has been brought on record by Revenue before us to controvert the aforesaid facts. A.O. without giving any observation /calculation has finalized the valuation on an add-hoc basis. Said approach of assessment of the A.O cannot be approved. Hence, CIT (A) has rightly deleted the addition - Decided in favor of assessee. - I.T.A. No. 1663/AHD/2009 - - - Dated:- 31-5-2012 - SHRI MUKUL KR.SHRAWAT, SHRI ANIL CHATURVEDI, JJ. Appellant by : Mr. B.K.S. Padya, CIT (D.R.) Respondent by : Mr. S.N.Soparkar, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld ornaments from Solanki Jewellers, Mumbai @ Rs.870/- per gram, whereas the market rate of 22 ct. gold on the day of such purchase was Rs.790/- per gram. It was also found that the assessee had valued the closing stock of 22 ct. news gold ornaments @ Rs.658.64 per gram. The assessee was called upon by the A.O. to explain this apparent inconsistency. In reply the assessee contended that he has adopted the weighted average rate for valuation of closing stock as prescribed under Accounting Standard AS-2 issued by the Institute of Chartered of Accountants of India (ICAI). The contention of assessee was not accepted by the A.O. He accordingly made addition of Rs.2,50,73,437/- on account of valuation of closing stock. The income was finally dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that inventories should be valued at the lower of cost and net realizable value . In para-16, it is further mentioned that the cost of inventories should be assigned by using the FIFO or weighted average cost formula. In para-17, the weighted average cost formula has been further explained as under:- Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. The average may be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances of the enterprise. 4.3.2. A working of the weighted average cost has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consistently followed and accepted in the past, the same method appears to have been accepted in the case of C.H. Jewellers Pvt. Ltd. also. Accordingly, I am of the opinion that the A.O. was not justified in disturbing the method of valuation adopted by the assessee without bringing on record sufficient material to show how the said method was defective or incapable of providing a proper computation of income. Accordingly, the addition to the value of closing stock of Rs.2,60,63,437/- is directed to be deleted. 5. Aggrieved by the decision of CIT (A), the Revenue is now in appeal before us. 6. Before us the D.R., submitted that the assessee had purchased ornaments on 3-3-2006 @ 870.603 gms but while valuing the stock as on 31-3-2006, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee has worked out the valuation of inventories and cost of sales at weighted average cost and therefore, it has not adopted two different standards one for valuation of closing stock and the other for cost of sales. It was further submitted that the valuation exercise is to be done on yearly basis and not on a monthly basis there is no law which prescribes that valuation has to be done on monthly basis. The assessee has been following the method of valuation as prescribed by AS-2, issued by Institute of Chartered Accountants of India which states that inventories should be valued at the lower of cost and net realizable value. It was further submitted that the similar method of valuation has been accepted by the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther given a finding that the rate of Rs.764/- gm is also not weighted average rate computed after considering all periodical transactions. He further gave a finding that the basis of ad-hoc addition of Rs.10 lac is not known. The finding of CIT (A) has not been controverted by the Department. No material has been brought on record by Revenue before us to controvert the aforesaid facts. In the case of ACIT vs. Shantilal Nagardas Co. (supra) the co-ordinate bench has held when Revenue department accepted a method of valuation of closing stock in earlier years, on the same set of facts and circumstances of the case of the business of assessee, then the principle of consistency should be followed by Department while making the assessment tho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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